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Special Needs Trusts

BELLOMO & ASSOCIATES, LLC

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SPECIAL NEEDS TRUSTS

Many times, individuals with special needs require lifelong care that is tailored to their specific needs. This may be for physical needs, because they lack the capacity to handle their own finances or make medical decisions or simply because they are receiving benefits because they are not able to fully support themselves due to their limitations. But what happens when their existing caregivers are no long able to meet these needs or pass away? How does an inheritance affect them? What if they receive an award from a law suit related to their disability? What if a family member wants to provide for their loved one during their lifetime? We can provide guidance on how to deal all of these scenarios and insure that your loved one does not lose any benefits they may be receiving.

Two Types of Special Needs Trusts:

"Self-Settled" or a "First Party SNT"

A “Self-settled” or a “First Party Supplemental Needs Trust” is funded with the beneficiary’s (the person who has the special need) own money. A good example of this is where a beneficiary has been involved in a lawsuit and is now coming into a large court settlement amount which, it is the money of the Supplemental Needs Beneficiary. That money is used to create the trust. These types of trusts are created by a parent, guardian, grandparent or the court. Recently, the law was changed to allow the disabled person to create a First Party SNT for himself or herself, if competent to do so. This will allow the beneficiary to continue or begin to receive assistance without the trust being counted as an available asset for them. This type of trust requires a provision that reimbursement be made to the Department of Human Services for benefits received during the lifetime of the beneficiary.

"Third Party SNT"

A “Third Party Supplemental Needs” trust is created using the funds of others to create a trust behalf of another. An example of this is when a parent creates a special needs trust within her or his will or trust for the benefit of the beneficiary with supplemental needs. A standalone third party SNT can also be created and funded during the lifetime of the grantor (usually a parent or grandparent). This type of trust is funded with money that does not belong to the disabled person. It is created either during the life time of the person establishing the trust (grantor) or upon the death of the parent as part of the parent’s estate plan. Anyone can contribute to a third party SNT, thus allowing people other than parents to name the trust in their will or as a beneficiary on other assets. This type of trust does not require a provision that reimbursement be made to the Department of Human Services for benefits received during the lifetime of the beneficiary.

Both of these trusts have special considerations as to when funds can be distributed from the trust to the beneficiary. A properly designed and funded special needs trust can provide your loved one with funds capable of maximizing his or her quality of life without jeopardizing eligibility for assistance from other sources. Trust funds can be used to pay for education, travel, high-end medical and dental care, transportation, entertainment, and much more.

It is important to note that supplemental needs planning is an extremely complicated area of the law. If a supplemental needs trust is improperly designed, funded or implemented, your loved one may lose or not qualify for benefits under other programs such as Medicaid.

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